Opera Ltd (OPRA) 2018 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your Opera Limited third-quarter 2018 earnings call. (Operator Instructions). I would now like to turn the call over to Aaron McParlan, Opera's General Counsel. Sir, you may begin.

Thank you. Greetings and welcome to Opera's third-quarter earnings call. Together with me today I have our CFO, Mr. Frode Jacobsen, and our Chief Operating Officer, Mr. Song Lin, who will cover our prepared remarks and answer any questions.

Before we begin I refer you to our Safe Harbor statement in the Company's earnings release, which also applies to the conference call today, as management will be making forward-looking statements.

Our commentary today will also include non-IFRS financial measures. We believe that the use of these non-IFRS financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation or as a substitute for financial information prepared in accordance with IFRS.

Reconciliations between IFRS and non-IFRS metrics for our reported results can be found in our press release that was issued today. A copy of which can be found on our Investor Relations website. It is now my pleasure to turn the conference over to our CFO, Mr. Frode Jacobsen.

Thank you, Aaron, and a welcome to you all from me as well. We have been looking forward to this call and the opportunity to give you an update on how the business is performing. I will begin with the financial highlights. We are very pleased with the results which exceeded our expectations. We achieved all-time highs on all key metrics and are raising our revenue guidance for the full year.

During the quarter we achieved strong user and top-line growth while maintaining healthy margins. Third-quarter revenue was up 17.4% to $44.7 million driven by a 57% growth in advertising revenue and strong results in the new retail revenue stream that we will talk more about today.

When looking at our year-over-year trajectory, just keep in mind that the third quarter of 2017 contained both other income associated with the divestment of certain intellectual property and a related technology license deal, which resulted in a strong quarterly spike in revenue and profits that were not recurring in nature. We achieved in this quarter of 2018 an adjusted EBITDA of $16.5 million representing a 36.9% margin and an adjusted net income of $12.5 million or a 28% margin.

In the third quarter our IPO and concurrent private placements took place. We issued a total of 29.87 million new shares and collected net proceeds, after underwriter and other related costs, of $167.2 million. Combined with our underlying positive cash flow, our September 30 cash balance increased to $217.6 million.

Among our new shares 19.87 million was issued in connection with the IPO and our underwriters' option to purchase additional shares. This corresponds to 9.93 million ADSs currently trading given the ratio of 2 shares per ADS. Other shares remain subject to the six-month lockup that expires after January 22, 2019. So, at the end of Q3 we had a total share count of 220,119,343.

Turning to our share repurchase program announced today, to date we have continued executing on our strategy as planned and are achieving results ahead of expectations. The same strategy and traction led to a very strong demand for our stock in our IPO even with the shorter track record. Yet over the past few months our share price has declined. As a result our Board of Directors has concluded that a share repurchase program will provide attractive return on capital and has authorized the repurchase of up to 1.5 million ADSs which management will initiate on Monday.

Before I hand it over to Song Lin, I'll provide an update on guidance. Following a strong third quarter we expect fourth-quarter revenue in the range of $48 million to $52 million or a 29% growth year-over-year at the midpoint. Consequently we are raising full-year 2018 guidance to a range of $172 million to $176 million, up from our previous range of $170 million to $175 million.

Looking ahead we continue to be excited about the growth prospects of our business. Beyond the fourth quarter we would comfortably expect to sustain similar year-over-year growth rates as we are guiding today. We believe we are in the early stages of capturing the monetization potential of our business with many levers available to us, most notably related to the traction we are seeing in our ad monetization.

Our healthy cash flow combined with scaling business allows us to continue to invest in growing the business. This will further strengthen our growth potential and serve as a foundation for a longer-term margin expansion at a target operating model of adjusted EBITDA in the 45% to 55% range. So with that I hand it over to Song Lin to cover our operational highlights.

Yes, thank you, Frode. Hello, everyone. So first I would like to appreciate your participation and interest in following our Company. I will start by talking a bit about our users. So I will start with Opera News, our AI-based content platform.

So again we are quite pleased to share a very strong Q3 in terms of user growth. We grew to an average of 121.4 million MAU on Opera News platform in Q3. This is more than 20 million up from the last quarter average. Within this we have also reached about 17.4 million MAU on the dedicated Opera News app, which is another increase of nearly 10 million from the last quarter average. Overall we are very excited about the continued strong user growth of Opera News and we hope you feel the same.

Beyond Opera News we are also pleased with the overall growth of our smartphone user base where we have reached 195.4 million average MAU in the quarter, which is up over 13 million in aggregate. Also on the PC side we have reached 58.4 million MAU, which is up 1.3 million in the quarter.

I would also like to comment that we are now starting to see a convergence. We really allowed ourselves in this quarter to focus more on visual and the design rich mobile products, as we have done on the PC platform, and now we feel we are seeing all the signs that our physical positioning of our differentiated PC offering in the West may be complemented with a new pickup of also mobile user base there.

We never really had that, so with this in context, I think you should have in mind when you read about or, perhaps even better, try our new and award-winning Opera Touch browser which we just launched on Android or iOS. I think you will like how instantly the search results when you are opening up Opera Touch. For myself I have become a loyal user of it and I hope after the trial you will feel the same.

So as a conclusion, I think Q3 demonstrates our ability to benefit from our existing scale and a strong product portfolio. We continue to believe that our decision to secure a dominant content platform with Opera News, in particular in Africa and the emerging markets, is really cementing a highly attractive strategic positioning.

As you all know, the market is only going to get bigger and probably faster than any other global regions. So to us this is really a greenfield opportunity which is too attractive to pass.

Also I would like to within this context discuss about our $30 million investment into StarMaker which we also announced. So as also mentioned partly in our road show where some of you have participated, for us we really view music as a strategic vertical that drives a lot of engagement and time spent. And this is lies within the category of entertainment and content.

Not everyone wants to create music but most people enjoy consuming it. People may not realize, but in emerging markets it actually can be even more prominent. For instance, in Africa people would actually be more motivated to create and consume music wherever network conditions and handsets allow it, than perhaps creating and sharing something text based.

So finally, the other important point is that the social networking aspect of such a platform is also super important. So for us, instead of spending time to build this from scratch, trying to secure sufficient copyrights from all those music companies and really expanding the entertainment aspect of Opera brands, we feel it was a relatively easy decision for us to try to secure strategic alliances in the music field by taking a stake in a successful and, probably more importantly, fast-growing company that already existed in our periphery.

So within a short time frame StarMaker has become the number one streaming app in India and top-two across Indonesia and the Middle East and it's really much more than just a singing app. It has a continuous feed flow and very attractive party room functionality. And again, I think I would recommend you to try it on your Android phone and you will also get a better sense of it and I hope you are equally excited.

Finally, I would also like to point out that music within a news stream is a very proven model, perhaps first in China and now it's entered another stage of expanding into the global scene. And for us it's super important to be part of it. We ourselves believe strongly that Opera and StarMaker have many opportunities for mutually beneficial cooperation. And of course the cash we have invested into the business will be able to support its investment into growth.

Ultimately we can assess if we want to exercise our option and take a controlling stake or remain a holder of preferred shares with guarantees and rights above other shareholders. So we strongly believe this will be very valuable in the long run.

And also I would like to mention that in our past communication we have almost downplayed some of our potential beyond content, namely in the space of mobile payments. So, that's why in this quarterly release we have also provided just a bit more color and the metrics that hopefully will start building an appreciation of some other building blocks of what we are staging for the future.

For instance our associate, OPay, which is actually one of the few licensed and live mobile money platforms in Nigeria, within Q3, just one quarter, it has reached a daily transaction volume of more than 200,000. And now during October, it has reached 700,000 per day daily. As you can see, the potential there is huge, both in terms of transactions and also in potentially attractive other payment services I'm told.

And on top of it, we have also penetrated into other related fields. For instance, in many countries we have launched prepaid mobile airtime and data, which effectively has the same functionality of currency in many of the countries where we focus on. And this points those initiatives are not focusing on immediate profits short-term, but more in line with scale and building a much more successful payments as you would see in normal e-commerce business models. And we feel this can serve as a good base for future expansions.

Just to conclude, I would just note that, while I did spend time providing a broader view of what we are doing, one thing has to be very clear. For now our number one focus remains to be the leading platform for AI-based content distribution may it be articles, may it be videos or beyond. On top of this we are going to expand into verticals in areas where we are strong. So again, we are a Company with very high ambitions. And with this I will hand it back over to Frode for the final details of our earnings results.

Thanks, Song Lin. Okay, let me now turn back to discussing our third-quarter financial results in a bit more detail.

So as I mentioned, Opera had record revenue in the quarter reaching $44.7 million. Search revenue represented 43% of total revenue or $19.1 million, which was up 12.3% year-over-year. This mainly followed increases in the average revenue achieved per search query. We have maintained search revenue at a strong level, even in the context of foreign exchange headwinds, which is easiest to see on the sequential search revenue.

Advertising revenue reached 39% of total or $17.6 million in the quarter, which was 56.8% up year-over-year. This strong growth was supported by several factors including our initiation of direct campaigns on the Opera News inventory in the browser, but also from the revenue share deals with e-commerce partners and various services that we control and monetize ourselves.

The technology licensing and other category represented 11% of total revenue or $5.1 million, a 48% decline year-over-year. As stated before, this revenue category is more volatile and lumpy in nature than the others and we saw an exceptionally strong third quarter of 2017 in terms of licensing.

Finally, retail revenues represented 6% of total revenue or $2.9 million in the first quarter of material activity. Our total operating expenses amounted to $32.8 million in the third quarter, which was unchanged versus the third quarter total of 2017.

I'll now focus on the five largest categories representing 86% of the total operating expenses. Compensation expenses were $9.4 million, down 24.7% year on year. This mainly consisted of cash-based compensation, which was $8.6 million or down 4.7%, which was mainly due to extraordinary costs in the 2017 period following the divestment of certain intellectual IP and the related team.

The other part, equity-based compensation, was $0.8 million in the quarter compared to $3.4 million in the third quarter of 2017. This decline was driven by a reduction in accruals related to Social Security cost of our RSUs as well as the elevated 2017 expense given that being the first year of a new employee RSU program.

Marketing and distribution cost was $7.7 million, slightly down 2.4% year-over-year. We continue to maintain a very active market presence, as is also reflected in our user growth. In the third quarter we benefited from the ramping up of the OEM channel for Opera News, which delivered a greater share of our new users coming from paid campaigns.

Payouts to publishers and monetization partners were $5.5 million, substantially higher than the $0.4 million in the third quarter of 2017. This category is growing as the monetization of our user base evolves with both content and service partnerships supporting the growth, as well as the introduction of retail revenue in the current quarter that does not initially generate a positive margin.

Hosting was $2.5 million, 3.2% down year-over-year and continuing the trend of cost reduction in this area. Finally, depreciation and amortization was $3.1 million, a 38.8% decline versus last year following expirations of depreciation schedules on equipment.

So as a result we achieved $11.8 million of operating profit representing a 26.5% operating margin. Our net income was $9.7 million with this quarter alone delivering 160% of the net income we had for the full year of 2017. Our adjusted EBITDA, which excludes RSU cost and expensed IPO-related costs, was $16.5 million representing a 36.9% margin.

Our adjusted net income excludes the same RSU cost and expensed IPO-related costs as well as the amortization costs associated with a step up in value of acquired intangible assets. For us that relates to one thing only which is the amortization of acquired technology and customer relationships from the privatization of Opera in 2016 amounting to about $1.3 million per quarter.

Finally, we reduced these adjustments with the impact to our income taxes associated with those expenses such that we present a fair and balanced adjustment. In the quarter our adjusted net income was $12.5 million representing a 28% margin.

So to summarize, we are again very pleased with the solid quarter. We look forward to keeping you updated on our progress as we continue to execute on our plans and ambitions. So with that I will turn it back over to the operator to take questions.

(Operator Instructions). Hillman Chan, Citigroup.

Congrats on a solid quarter of results and thank you for taking my questions. Firstly, could you help us understand the growth in our mobile MAU of Opera browser and the standalone Opera News app in the key markets?

And also as to the advertising revenue per MAU in some of these key markets, how has that been trending sequentially in third quarter? And what's the driver behind the advertising revenue per MAU growth in third quarter in particular related to the newsfeed advertising? And then I have some more follow-up questions.

Okay, sure. So, this is Song Lin here. So, I suggest -- so first of all, thank you, Hillman, for asking the questions. I appreciate it. I think me and Frode will try to split the questions. I think I will try to address the questions around the user growth, both for the browser and also for the news app. And Frode can probably comment a bit on the revenue and ARPU part of it, a bit high level.

So, I think I would just add a bit of color there. I think it's a very relevant question. So, I will start with the news app since it is one of our most important initiatives. So, I think our news app, as you already see on the quarterly results, I think we are quite pleased with the faster growth of the user base. And on top I would like to mention that for now our focus remains in key vertical markets like Africa, which is I think still most important.

We have actually seen a very high engagement and very high intention which actually give us some -- I would say a lot of encouragement of how big we can further grow in those regions. But of course it's also a reminder that we just have to be focused and we have to be concentrating and anticipate the market. Because the whole market is still big.

Let me give you some examples. For instance, in Nigeria I just take a look -- since you actually asked the question last time, I take a look in Nigeria. The average time spent waiting for the browser is 38 minutes last time in June; but in October we have already been more than 40 minutes, which is almost 6%-7% up quarter to quarter. And this is actually not considering we are beginning to launch much more video content now from November on, which we think will have an even bigger impact.

The other thing I also want to mention is that, for instance, in Nigeria we have also just launched local news which is now covering more than 25 cities and states in Nigeria alone, covering more than 90% of the population. So I raise this as an example just to say there's a lot of things we can do even in a single market and it's super important for us to be focused.

So I guess this is more like high level to answer your question of how do we see the user growth on Opera News. I think we are very happy about it, but we also remain to be very focused in our key markets, which is Africa, and also we are expanding to other related markets.

I will also touch some high level base on the Opera mobile user base since you also asked that. So as I also commented in the earlier quotes, that the mobile user we see a very good growth trend quarter to quarter. But even more importantly that now actually we see that previously our mobile user base and our desktop user base are quite separated. So we have a good user base in Europe for desktop, but then we have an almost completely different user concentration on mobile in emerging markets.

I think what's been happening in this quarter, which we are very pleased about, is that I think it's the first time that we've seen more and more users also up taking our mobile users in Europe, which we're actually very excited about. This is partly because of the new product launch we have on Opera Touch, which is now both available in iOS and in Android. But also we have released the Opera for Android offer, which is now also very popular we see in Europe and has a very high uptake.

So I think that's the other guidance I would just like to point out in our directions, especially on the mobile browser field. So I think those are two high levels that I would like to mention. But then for revenue and ARPU, I will turn that over to Frode and he can comment a bit more.

Yes, thanks, Song Lin. So without going into country specifics, I would say that overall our user driven monetization is performing extremely well led by this near 57% year-over-year growth in advertising. And also keep in mind in the third quarter of 2017 we had already begun monetizing the Opera News traffic.

So I think partly also what allowed us to exceed our expectations for this third quarter was we have so many opportunities ahead of us that we are starting to pick from in terms of how we can improve our monetization ability.

And so in this quarter in the reports we mentioned, for example, that now we have initiated to use direct sales campaigns on the Opera News inventory which is positive. And another one, which is an example of one that is ahead of us, would be the initiation of monetization of the standalone Opera News client which has not yet begun.

On a per user level I would say that if I take a look at the total, on the PC user base our ARPU is quite stable but attractive. And of course this is a user base that has grown by 18% in the past year. So I think to maintain an ARPU in that context is quite good. We -- also in light of the currency headwinds; I can cover in a bit more detail if there is interest.

On the smartphone side, I think the trend also on a per user basis is very positive, which is very obviously true on a gross (technical difficulty), but it is also true on a net level after you consider our payments to publishers and monetization partners.

Got it, thank you, Frode and Song Lin. I have another question on our investment in StarMaker. Could you help us understand if there's any synergy between StarMaker of our existing business, if any? And then could you share more color on the competitive landscape of the music streaming businesses in India? And also, how should we think about the profitability of this business and the potential impact to our P&L?

Okay. So this is Song Lin. Again, I think maybe what me and Frode will try to split is that maybe I will answer a bit about potential synergies that you see on product and then Frode can probably comment a bit on any impact on the investment or P&L.

So yes, I think, yes, I do think there's a very strong synergy between streaming music video-based app and Opera. As I also mentioned earlier, that if you see from say China space say from Toutiao for instance and TikTok, you will actually see that it's now quite obvious that the good combination of both a news app, but also with video but also music content with also social networking functionalities is very essential.

So to me I think it's already a proven model. Anyone in China would be able to see that. But more importantly, the same model has also moved to overseas markets. So to me I think is almost goes out of the question that Opera has to be there. The only choice is if we do it from scratch ourselves, maybe spend a few years to do it and tens of millions of money. Or do we try to get and [steal all the] stake in a company where potentially we could also be able to control later.

So for us I think that's a relatively easy question and to be more specific, right. So even though, of course, for now we have not really worked with each other before the investment. But afterwards I think that I potentially see there could be a lot of cross promotions, even specific verticals integration of content into -- from the music video into the news app, and also a lot more cross promotions, partly also because we have acquired a big overlapping of regions.

They are particularly big in India and Indonesia, even now moving to North Africa and we are also quite big in those emerging markets. So to me we really feel very excited about it and we feel there could be a lot of synergies in the next few months to come. And hopefully we will be able to share those results in a follow-up in our quarterly reports the same way we have shared results on OPay and AdWords.

Maybe some also high level about the competitive landscape. So again, I think music is a pretty big and broad category. So there are many types of music service. I think in particular for this StarMaker, they are very concentrated on both a streaming app, which means it's not just playing background music, you actually are very engaged in streaming very beautiful songs, which I'm actually very impressed.

I don't know actually if that's been possible that for all those people in all those markets that they are able to sing so well on their mobile phones. So I am very impressed. But even more, they have also moving into not a news feed, but a music content feed format, which is similar to what you see in even Opera News.

So I think actually StarMaker is one of the few people which have started to do this in those regions. So I would say they actually have an early start. But overall, without mentioning names, I think it's fair to say that if we're concentrating on specifically music streaming apps, I think for now they are the number one in India and I think they are probably top-two across Indonesia/Middle East even though they have just launched a few months there.

So, I think we are very optimistic about their growth potentials and about how fast they can further grow in this area. So, with this answer I will turn it over to Frode about any potential investment profits or gains.

Accounting wise it's quite simple, really. We recognize our ownership of shares valued at $30 million and at each reporting period we are required to assess if we believe that value has gone up or down and then recognize the impact of that. But other than that, no recurring and automatic P&L impact of the investment.

Got it, thank you. And another question is on OPay. You shared some exciting figures on the transaction volume on OPay since the quarter and also up to October. Could you help us understand the geography of that growth coming from and the monetization model of that transaction volume? And how should we be thinking about the market share of OPay in a key market?

Yes, so this is Song Lin. Again I will just try to cover high level and Frode will help me just add anything untold. So yes, I think OPay as a payment business, it is very per country specific. The only reason is just because for anything with a payment it's usually very heavily regulated. You need a very specific license, so you really have to launch it per market basis.

So the number which I quoted earlier is specifically in the biggest country in Africa, Nigeria, which is also the biggest market, which we are very excited about in terms of populations. So all the numbers we mentioned is only in Nigeria, we have a full mobile money license. And as mentioned, we are able to grow to already 700,000, 800,000 per day in October timeframe.

In terms of business model, it is quite simple. So, when we're proceeding with those transactions, means when we are taking money from users, deposit into our mobile wallet and when it helps them also pay it out we charge a fee, which is a transaction fee and then we take a margin there. So it is very straightforward, but I guess I would like to mention just that, same as other payment business or e-commerce business.

And this point, even though we do take margins, we are profitable in terms of gross profitable, our priority is probably not to take as much transaction as possible. So for us I think it's super important for us to almost establish ourselves as the number one player in that field and dominate the payment market.

So, I think if there's any gross profit we'll probably want to spend that in how to expand our user base and build up our transaction volumes. So for us that would be the most important because it's also -- e-commerce is -- like payment is a field I would say there's no ceilings. You can really go as high as it gets and that is all very extremely big value for us in the long run. So that is where our focus is.

And in terms of -- yes, so I think in terms of competitive landscape and also where we are in the market, I would say we've just started. We are in the beginning stage, but we already grow very fast. I don't want to do some too aggressive forward-looking statement, but I think our goal would be just to be the number one in that area ASAP in Nigeria. And I think it is possible for us to do that in a relatively short time frame.

And lastly, (inaudible) search, advertising and payment businesses. Could management share with us the latest developments about our crypto currency businesses, if anything?

This is Song Lin here. So, yes, in Q3 we actually -- we also launched a crypto wallet together with our browser value propositions. We have also worked with many partners discussing like potentials. Also in our key regions like Africa we are very well received. We are actually asked even by many I would say government people locally to see if crypto can be used in the payment business for instance in conjunction.

However, I think I would also like to say that it's a bit still in the early stage. It takes a lot of time for those kind of major initiatives. So, I don't have anything extra to share at this stage, except what's already been released in our product.

Congrats again on the solid quarter results.

[Chawing Hoi], CICC.

Congratulations on the strong results and thanks, Hillman, for covering most of the questions. So, I have some follow-ups on our OPay business and StarMaker. About StarMaker, when will be StarMaker starting to contribute in the P&L level like making profits? And on OPay, I just want to know are there going to be more marketing expenses for us to promote OPay in our key areas like Nigeria? I have some follow-ups.

Maybe I can begin. This is Frode here. In terms of StarMaker P&L and profit contribution, so at our current ownership share we do not recognize any percentage of the StarMaker result as a recurring item on our P&L. So we have mentioned that we do have an option to increase our ownership share to 51% and thereby take control of the Company, which is an option that we can execute during the second half of 2020. So, in terms of today's framework of agreements, that is the point in time where that could be an item in our P&L.

For OPay and promotional activities, I think, Song Lin, you can maybe describe a little bit more sort of the business impact of how it's growing. It is quite limited. Keep in mind it is a separate company that operates a shareholder in. And we recognize our percentage of the OPay financial results as a contribution from an associate in our P&L.

Yes, this is Song Lin. I think I can also add a bit of color. So yes, as Frode said, I think for OPay I believe we're actually one of the very few companies which are able to grow very fast in this space and we're seeing a lot of money at least on the business itself. Obviously OPay as a company, they probably need to have some R&D costs, this and that. But at least for the model itself it's actually already profitable and that's what we are very pleased about.

And so you have also asked about our strategy of whether we have the expanding to other markets. So, I would say just that, yes, we definitely are planning to expand into other key Africa markets. The only thing just to add for payment is actually very localized, you have to have a local license, you have to build up a very strong local team and you have to -- it's also a very high ceiling, leaving Nigeria alone. So it's also a matter of priority and focus.

So I would say in the very short timeframe we are probably still concentrating on Nigeria because there's just such a high ceiling for us to grow there. But at the same time we are very actively looking for opportunities in all the other -- particularly African regions and planning there, which -- but we will share more information when we feel it's a bit more material in that space.

Great, thanks. My next question about our ad load, what's our ad load currently in both Opera News and in browsers and for our standalone applications? And also what's our target?

I can comment a bit and Frode can also add anything on pulp. So I think in Q3, at least for ad loads, it's still only available on the browser. We have not really started to add that into the news standalone client. As I discussed before, it's a matter of focus and we want to grow user base there on the standalone client so that's why we have not enabled it.

For the browser I would say, again, it's probably hard to say the exact ad load just because different companies use a different way to marry it. I would say we are still at a very early stage, so let's say maybe 20%-30% of the ad load which we are actively pursuing in the browser space. But again, it's more like an estimation. It also varies like region to region.

For standalone news app, we have already started to have some very initial monetization now like in end of October, start of November. We see that there is a very good potential. It's already having solid validation. But I would say on standalone news clients so far the primary goal is still to grow the user base because we think that's the most important. And after that I think we'll spend a bit more time on how we can further add ad flow.

So that's a bit more high level I would say. But again, just also reflecting what Frode commented earlier, that we are quite pleased that, even though we've just started in the very early stage of ads monetization, we are able to demonstrate quite a strong growth in ads which we are happy about.

We are also I think quite clear what we need to do. For instance, increase ad flows, have better targeting, improved working with more ads, SDK partners, this and that. So we have a pretty clear roadmap of how that can be done. It's just a matter of execution and a matter of balancing of our user growth. So that's some of the high levels which I'm trying to describe.

I don't have much to add on top of that. I thought to just underline that last point that Song Lin had made there that, as you think about modeling this ad load is of course important, but then there are so many other factors that are sort of those multiplied by kind of items with eCPM optimization being extremely important and an area where we see a lot of opportunity versus we are today.

Under that I consider both optimizing on the demand sources but also making on a per impression basis serving the right ad. And of course additional formats with higher value. So I think those are key and of course all of this is happening in very -- we believe in the context of very favorable underlying macro drivers.

I also want to ask about -- may I have the breakdown of Opera News -- Opera business by geography? Like how much is from US, from Europe and how much is from Africa? It could be by revenue or by number of users. Anything would help.

Again, I think for revenue I'll just leave it to Frode. In terms of user base, it's kind of different per product. So I will try to address it separately. For our desktop users, I don't have, again, latest numbers right in front of us because we typically don't track by bigger regions.

But I would say I think the ratio is still that I think close to 70% would be from Europe and the US I think. And add the US probably more than that. And the other percentages are primarily from some other parts of the world, so that's for desktop.

I think for mobile, especially our mobile browser users, for now I would say it's probably 40 -- a bit more than 40%-50% coming from Asia, especially if you look at smartphone. And then close to 30%-40% from Africa and the rest from other parts of the world. But I think the percentage -- African is growing very fast. It's just because we do have a lot of users in Africa, it's just many of them are still on the feature phone base. But once they move to smartphone they will move to Opera.

So I think in the long run the ratio of Africa will probably grow in terms of percentages. As I also commented that we also have quite a big attraction those days, even for mobile browsers in Europe, but then of course because the absolute number there is still relatively small; in the short term it's probably not going to change the major percentage. It's just because our user base in Africa and Asia are so big. But that's more like a user base. Apparently the revenue contribution will be a bit different.

In terms of news -- news app, for now our major concentration is still in Africa. So Africans still have the higher percentages. The rest will be from India, Indonesia, etc. So, that's a bit high level, but I would let Frode cover also the revenue part if any.

I don't have that much to add. Of course the PC user base being very Europe dominated and Western dominated provides revenue for that region. So, I think in terms of any single region, I would say Western markets be in the 40% range and then 70% of our revenues coming from Africa and Asia roughly speaking.

So, my last question is about our direct sales. What's the contribution of revenue for direct sales?

I actually don't have that out of my mind. I think the only comment I would say that it actually grew very fast in terms of advertisements. It's just because where we are big like Africa, we find out that we are actually much better in monetization than by some normal channels or normal assets, (inaudible) for instance. So yes, it's fast growing, but I actually don't have it on my mind about the actual percentages.

It's almost like the topic of a much broader discussion, because there's always opportunity cost as well. So I think when we look at direct sales we also look at it in the context of that resulting in better eCPMs also for the traffic that we send to networks. Because you essentially broaden your demand pool. You reduce the risk of over serving a single ad and so on and so on. So there are benefits.

I think broadly speaking, over the past months, and also into the future we will continue to benefit from broadening our demand pool and having the ability to leverage direct sales, which we have a long track record of doing. Think about those speed dials that we call them, the traffic partners we have, all those contracts and being able to leverage that also on industry-standard ad units we think is very attractive.

That's all my questions. So congratulations again on the record high quarter.

I'm showing no further questions at this time. I would now like to turn the call back to the speakers for any closing remarks.

Okay, now I think at this point we'd just like to say thank you all for joining us today and we wish you a good rest of today.

Thank you, guys. Thanks for participating.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.